Written by: Nanak Nihal Khalsa, Co-founder of the Holonym Foundation
Compiled by: AididiaoJP, Foresight News
In most past cycles, crypto teams convinced themselves that airdrops were building communities. However, in practice, airdrops evolved into something entirely different: a large-scale training mechanism that taught people how to extract value with maximum efficiency and then walk away.
This outcome is not accidental; it is an inevitable result of the way tokens were issued between 2021 and 2024. Low circulation, high fully diluted valuations, points programs that reward actions rather than intent, and eligibility rules that anyone with enough time and scripting ability could reverse engineer. The system we built made the rational behavior to batch create wallets, simulate engagement, and sell at the first opportunity.
The crypto industry is accustomed to talking about trust as an abstract concept. But in reality, trust is eroded because token issuance no longer aligns incentives with belief; participation has become transactional.
Loyalty turned into fleeting speculation, governance turned into performance. When users are rewarded for volume rather than conviction, what you get is not a community—it's mercenaries.
Airdrops Spawned Extraction Manuals
Points programs exacerbated this trend. Often packaged as a fairer way to distribute tokens, in practice, they turned participation into a job. The more time, capital, and automation invested, the more points one could accumulate. Genuine users were marginalized by limited resources, replaced by those who saw the points dashboard as a yield farm.
This happened in plain sight. Teams watched wallet clusters grow. Analysts published post-mortems revealing how a small number of entities captured a disproportionate share of the token supply. Yet, the model persisted, largely because it looked good on growth charts and bought short-term market attention.
The result is that airdrops lost credibility because their mechanics became predictable and exploitable. By the time the token launched, a significant portion of the supply was reserved for immediate exit. Post-launch price action became less about price discovery and more about cleaning up the aftermath.
Token Sales Return as Airdrops Lose Credibility
It is in this context that token sales and ICOs are making a comeback. This is not out of nostalgia, nor a rejection of decentralization, but a response to a structural failure. Teams are seeking ways to reintroduce screening mechanisms into the distribution process. Who qualifies for tokens, under what conditions, and with what constraints are now as important as how much capital is raised.
What's different this time is not the act of selling tokens itself, but how participation is being reshaped. Early ICOs were open to anyone with a wallet and fast fingers. This openness came with obvious downsides, including whale dominance, regulatory gray areas, and a lack of accountability.
The new generation of token offerings is attempting to introduce screening mechanisms that didn't exist before. Identity and reputation signals, on-chain behavior analysis, jurisdiction-based participation limits, and mandatory allocation caps are increasingly becoming critical parts of launch design. The goal is not exclusivity for its own sake, but to ensure tokens land in the hands of real users more likely to stick around long-term.
This shift exposes a deeper rift within the industry. Crypto has positioned itself for years as permissionless, yet many of its most valuable moments now depend on some form of access control. Without it, capital flows to automation; with it, teams risk rebuilding the highly surveilled systems they claimed to replace. The tension between openness and protection is no longer theoretical; it's a practical reality in every serious launch discussion.
Now, Participant Eligibility Matters More Than Fundraising Size
The uncomfortable truth is that we cannot solve this challenge by avoiding identity; we already live in a world where identity is everywhere. The question is whether it happens in a way that respects user autonomy or in a way that extracts data and centralizes power. The first wave of crypto infrastructure largely sidestepped identity, not out of principle, but because the tools to do it safely didn't exist. As launches scale and regulatory scrutiny increases, that avoidance is no longer sustainable.
In this context, privacy-preserving identity is shifting from an ideological stance to an infrastructure need. If teams want to limit allocations to one per person, or prevent automated clusters from dominating governance, or meet basic compliance requirements without collecting user profiles, they need systems that can verify specific attributes about participants without exposing their identity. Without such systems, the choice becomes a binary between blind openness and stringent doxxing. Neither scales well.
Simultaneously, crypto is confronting limitations at the wallet layer. Many of the problems plaguing token launches can be traced back to how wallets are designed and integrated. Account fragmentation, weak recovery mechanisms, blind signing, and browser-based attack surfaces collectively make it harder to build lasting relationships between users and protocols. When participation must happen through tools that are easy to spoof and hard to trust, distribution mechanisms inherit those flaws. It's no coincidence that launches suffering from sybil attacks also struggle with user confusion, lost access, and post-launch churn.
Some teams are starting to consider these issues systematically. They are no longer treating identity, wallets, and token launches as separate pieces, but as an integrated system—one where users can prove uniqueness without disclosing identity, interact across apps with a unified account, and maintain control without managing fragile private keys. When these elements come together, distribution stops being a one-time event and starts to resemble an ongoing relationship.
This is not about making launches smaller or more exclusive, but more targeted. A small number of participants who actually care is often better than a large number who don't.
Projects that align with human values tend to demonstrate stronger user retention, healthier governance participation, and more resilient market performance. This is not ideology; it's observable behavior.
The teams that will ultimately succeed are those that stop treating token distribution as a marketing event and start treating it as infrastructure. They will design by default for an adversarial environment, building resistance to automation from the start. They will treat identity as a tool to protect users and ecosystems, not a compliance checkbox. They will recognize that well-designed friction is a feature, not a bug.
The failure of airdrops is not due to user greed. The failure of airdrops is that their mechanisms rewarded greed but punished staying. If crypto wants to break out of its current audience, it must stop training people to extract value and start giving them a reason to belong.
Token launches are where that shift becomes visible. Whether the industry is willing to see it through remains an open question.
